Category Archives: March

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Although Benjamin Franklin first suggested the idea of a daylight saving time in 1784, it was William Willett, a builder living in Petts Wood, Kent, who first took the idea seriously enough to circulate a pamphlet to Members of Parliament in 1907. Willett’s argument was that advancing the clocks in spring and returning to GMT in the autumn would lead to an increase in health and happiness, and it would also save the country £2.5 million pounds (after taking account of the loss of earnings to the producers of artificial light).

British Summer Time (BST) was finally introduced in April 1916, as an economy measure during wartime – a move quickly followed by many other countries in the following few weeks. During the second world war double summer time (two hours advance on GMT) was introduced for the summer, while winter clocks stayed one hour ahead of GMT. For three years from 1968, Britain kept on BST throughout the whole year. But the experiment was abandoned in 1972, since when the Britain has kept GMT in winter and BST in summer.

In 1996 all clocks in Europe changed on the same day for the first time. The European Union has now adopted The Ninth European Parliament and Council Directive on Summer Time Arrangements in which summer (or daylight saving) time will be kept between the last Sunday in March to the last Sunday in October. The changes will take place at 01.00 GMT.

And the relevance to shares is…?

Research has shown that even minor sleep disruptions can cause profound changes in cognition, leading to anxiety, inattention, and impaired judgment.

An academic paper (Kamstra, Kramer, and Levi, 2000) looked at the potential effect the switches to and from daylight saving time might have on stock markets in the US, UK, Canada and Germany. The authors investigated the possibility that investors prefer safer investments and shun risk on the trading day following daylight saving time changes.

Some of the results they found were:

In all cases, it was found that stock returns were significantly lower following a daylight saving time change, than they were on other trading days, even after controlling for other known seasonalities like the Monday effect. This is consistent with anxiety-prone investors selling risky assets on the trading day following the sleep disruption caused by daylight saving time changes.

The daylight saving effect was found to be extremely significant for the UK and US markets, strongly significant in Canada, and relatively insignificant in Germany (likely due to the relatively shorter period of data available for Germany since there were no daylight saving time changes in that country between 1950 and 1979).

The Autumn daylight saving change had a greater impact than that in Spring.

In the US, the financial impact of this phenomenon amounts to roughly $30 billion on average, each time the clocks were shifted over the past 30 years.

The following chart shows the FTSE 100 returns for the days following the start of British Summer Time (BST) for the period 1985-2013.

Over the period the FTSE 100 average daily return was -0.07% on the days following the start of BST. In line with the paper’s findings, this was significantly lower than the average day returns for all days (+0.03%) and for Mondays (-0.01%).

March is a middling month for the share market, ranking 7th of all months in performance. Since 1984 the market has risen in 59% of years with an average return of 0.7% in the month.

The general trend for the market in March is to rise for the first three weeks and then fall back in the final week – the last week of March has historically been one of the weakest weeks in the whole year.

March marks the end of the 3-month period when mid-cap stocks strongly out-perform large caps: on average the FTSE 250 index has out-performed the FTSE 100 Index by 0.8 percentage points this month.

Sectors

In the last twenty years the sectors that have been strong in March have been: Financial Services, General Industrials, General Retailers and Industrial Engineering; while the weak sectors have been: Gas, Water & Multiutilities, Health Care Equipment & Services and Nonlife Insurance.

Stocks

For companies, the following FTSE 350 shares have performed well in March over the last ten years: Aggreko, Restaurant Group, IMI and Cobham; the shares of these companies have risen in March for nine of the past ten years and one company, Intertek, has risen in all ten. The shares that don’t seem to like March are: Aviva, RSA, Renishaw, RBS and HSBC; these shares fallen in March in at least eight of the last ten years.

Diary

This is a busy month for results announcements – 29 FTSE 100 companies announce their preliminary results in March (as do 74 FTSE 250 companies).

Quite a busy month on the economics front: MPC interest rate announcement on the 6th, US non-farm payrolls on the 7th, FOMC meeting starting on the 18th, and the chancellor’s budget expected on the 19th.

The results of the quarterly FTSE 100 index review will be announced on the 12th; it’s difficult to predict these things too far in advance, but at the time of writing the position of William Hill in the index is looking precarious, potentially to be replaced by St James Place. It’s triple witching on the 21st, so be on the lookout for increased volatility on the day.

The 6th March will mark 14 years since Vodafone hit its all-time high price of 399 (it’s still 44% below that high). And, to end on a cheery note, 12 March will be the 30th anniversary of the declaration of the 1974 national coal strike by Arthur Scargill.

As explained in the 2014 edition of the Almanac, the market has a tendency to be strong on the FTD of a month. And this effect has been even more pronounced in recent years.

Since 1984, the FTSE 100 Index has a return average of 0% on the March FTD, which makes it the second weakest FTD of the year. However, as can be seen from the chart, the average performance is greatly influenced by the fall of over 5% on the March FTD in 2009.

Shares that like March

The following table lists the five FTSE 350 shares that have the best returns in March over the last ten years. For example, Aggreko has an average return of 11.7% for the month of March. Each stock has risen in March in at least nine of the past ten years; Intertek is the only FTSE 350 company whose shares have risen in every March for the past ten years.

Shares that dislike March

The following table lists the five FTSE 350 shares that have the worst returns in March over the last ten years. For example, Aviva has an average return of -7.7% for the month of March. All five stocks have fallen in March in at least eight of the past yen years.

An equally-weighted portfolio of the above strong March stocks would have out-performed every year an equally-weighted portfolio of the above weak March stocks by an average of 13.7 percentage points in March for the past ten years.

Today is the last trading day (LTD) of March (and therefore also the last trading day of the first quarter).

As explained in the 2013 edition of the Almanac the LTDs of months used to be stronger than average, but in recent years they have been weak. This is quite different from the first trading days of months which strongly out-perform the average for all days, and where the effect has strengthened in recent years.

Since 1984 the market has on average risen 0.12% on the LTD of March, but it is not one of the stronger month LTDs of the year.

Since 2000, however, it has been the third strongest month LTD, with an average return of 0.26% on the day.

The following chart shows the FTSE 100 Index returns for every March LTD since 1984.

The following chart plots the average performance of the FTSE 100 Index during March since 1984 (more info on this type of chart).

The chart shows that on average the UK market climbs for the first three weeks of the month and then falls back towards the end of the month.

February 2013

The average chart for February was posted a month ago here. The following reproduces that chart and overlays the actual FTSE 100 for February 2013.

Despite the excitement of the UK losing its AAA rating and the Italian election, the month was pretty average from a historic viewpoint. The index reached the month’s high on the 14th trading day of the month (historically the high has been reached on the 12th trading day), and then came off slightly to end up 1.3% on the month (historically the index has risen 1.2% in February.)

March is a middling month for the market, ranking sixth of all months in performance. In the last 43 years, since 1970, the market has risen 28 years in March (a rate of 65%), with an average return of 0.7% in the month.

Strong sectors this month tend to be Industrial Engineering, Aerospace & Defense and General Retailers; while weak is the Gas, Water & Multiutilities sector. Historically, medium-sized companies have performed marginally better than large companies in March.

The following chart plots the percentage returns of the FTSE All Share Index for each March since 1980. For example, last year in 2012 the market fell 1.4% in March.

As can be seen, although on average the market increases in March, there have been the occasional large falls. The general trend for the market in March is to rise for the first three weeks and then fall back in the final week (in fact, the final last week of March has historically been one of the weakest in the whole year).

The year’s first quarterly review of the FTSE 100 Index will take place on 6 March. This is when the index is re-balanced and companies can be added to the index (following which their share price often falls) or ejected from the index (following which their share price tends to rise). It is difficult to predict the outcome of the review a few weeks beforehand, but just at the moment companies looking possible candidates for ejection are Serco, Melrose and John Wood, to be replaced by easyJet, London Stock Exchange and Direct Line Insurance.

The first Triple Witching (when the expiry of futures and options converge on the same day) of the year takes place on 15 March. Volatility can increase around this day, while in recent years the return on the FTSE 100 Index on the Triple Witching day itself has been significantly greater than other days.

Easter falls at the end of the month (the LSE will be closed 29 March and 1 April), when we might see an interesting market anomaly called the holiday effect. Academic studies have found that the market tends to be abnormally strong on the days immediately before and after holidays.

The big economics event in March will be the chancellor’s Budget, scheduled for 20 March. The other significant date of the month will be the 7 March MPC interest rate announcement at 12 noon.

Tomorrow, Friday 1 March, will be the first trading day (FTD) of March.

As explained in the 2013 edition of the Almanac, the market has a tendency to be strong on the FTD of a month. And this effect has been even more pronounced in recent years.

The March FTD has been one of the weaker ones of any month in the year. Since 1984 the average return on the March FTD has been -0.02%, and the market has risen in 57% of years. Since 2000 the average return has been 0.02%